After the 22nd GST Council meeting on 6th October ’17 and 23rd GST Council meeting on 10th November, ‘17, the Government announced major changes in the GST Law and Rules. In this blog, let us understand the impact of these GST updates on small businesses.

1.RCM on purchases from unregistered dealers suspended

Previously, persons registered under GST were liable to pay tax on reverse charge basis on purchases from unregistered dealers, if the total value of purchases from unregistered dealers exceeded Rs. 5,000 in a day. This has now been put on hold from 13th October ’17 until 31st March, ‘18, which means that on purchases from unregistered dealers from 13th October ‘17, the recipient will not be liable to pay tax on reverse charge basis.

This GST update is a welcome change for small businesses, as the additional cash blockage due to reverse charge on purchases from unregistered dealers, will not be an issue any more.

2. Registered persons with turnover up to Rs. 1.5 Crores can file GSTR-1 on quarterly basis

Earlier, all registered regular dealers were required to file monthly returns. Now, registered persons whose turnover does not exceed Rs. 1.5 Crores can file GSTR-1 on a quarterly basis and this will be applicable from the quarter of July-September ’17. Also, filing of GSTR-2 and GSTR-3 has been postponed and will be decided later. Hence, small business now need to file GSTR-1 on quarterly basis and GSTR-3B on monthly basis until March ’18. This GST notification is again a relaxation in return filing activities for small dealers whose turnover does not exceed Rs. 1.5 Crores. This will, in turn, lead to savings in time and cost of compliance for such businesses.

Until now, a person could opt for the composition scheme only if his turnover did not exceed Rs. 50 Lakhs (in Special Category States except Uttarakhand) and Rs. 75 Lakhs (in rest of India). Now, this limit of turnover for registering as a composition tax payer has been recommended to be increased to Rs. 1.5 Crores.*

As a result of this GST update, many more small businesses now have the option to register as composition taxpayers, for whom compliance activities are simpler.

*Note– The revised threshold limit for registering under the composition scheme for Special Category States is yet to be announced.

4.Persons supplying goods and having turnover up to Rs. 1.5 Crores do not have to pay GST on advance received

For manufacturers and traders, a major change under GST as compared to the previous tax regime was the liability to pay tax on advances received for a supply. This was adding to the crunch in working capital for small businesses under GST. Hence, the Government has notified that persons supplying goods and whose aggregate turnover does not exceed Rs. 1.5 Crores are not required to pay GST on advances received.

This GST update by the Government is a boost for manufacturers and traders whose turnover does not exceed Rs. 1.5 Crores. This will allow such businesses to free up more working capital for their business.

Note – This relaxation is not applicable for service providers and they have to continue to pay tax on advances received.

5.Persons providing exempt services can register under the composition scheme

Previously, service providers (other than restaurants) were not eligible to register under the composition scheme, even if their turnover was within the threshold limit for registering under the composition scheme. Now, persons providing exempt services have been allowed to register under the composition scheme if their turnover does not exceed the threshold limit of Rs. 75 Lakhs (in special category states except Uttarakhand) and Rs. 1 Crore (in rest of India).*

For example: Hotels having tariff less than Rs. 1,000 per day can now register under the composition scheme, as this service is exempt under GST.

*Note – This threshold limit has further been recommended to be increased to Rs. 1.5 Crores in the last GST Council meeting on 10th November ’17.

6.Registration is not compulsory for service providers making interstate taxable supplies

Until now, persons making interstate taxable supplies (except job workers) had to register, even if their turnover did not exceed the threshold limit of Rs. 10 Lakhs (in special category states) and Rs. 20 Lakhs (in rest of India). Now, registration is not compulsory for such persons. Hence, service providers whose turnover does not exceed the threshold limit can make interstate supplies, without having to register. This GST update is again a major relief to small service providers from the compliance costs of registration for making interstate taxable supplies.

7.Services from GTAs to unregistered persons will be exempt from tax

Previously, GTAs were hesitating to provide transport services to unregistered persons, as they thought that they would be obligated to register and pay tax on the supply. Due to this, GTAs were not willing to provide services to unregistered persons. In order to facilitate unregistered small businesses to avail GTA services, the Government has decided to exempt transportation service provided by GTA to unregistered persons.

In conclusion, the GST updates made in the 22nd and 23rd GST Council meetings have been made with the primary objective of making compliance under GST easier for small businesses. Businesses can now make use of these measures to ease their compliance activities under GST.